No gold medals for the UK economy

The governor of the Bank of England has tried to draw a comparison between Team GB's road to the 2012 Olympics, and the economy's even longer road to recovery.

But there was no getting away from the gloomy news in the Bank's latest quarterly report. A year ago the Bank thought the UK would grow by around 2% in 2012. Now it does not expect us to grow at all.

That change to the forecast was not what anyone in the city would call news. Given the recent economic data, it would have been a shock if the Bank had not slashed its old growth forecast.

What is a little more surprising is the Bank does not seem to be planning to do very much about that weaker economic outlook.

Inflation in the short term is going to be lower than the Bank expected three months ago. But the forecast for inflation after 2012 is very little changed - if anything, it is slightly higher than before.

It's true that the mid-range of the forecast shows inflation below target for most of the next two to three years. Other things equal, that would suggest a little a more quantitative easing might be on the way.

As Michael Saunders, at Citi, points out, the "market forecast" for interest rates, which is built into the Bank's inflation charts, now includes an expectation that bank rate will be cut one more time, to 0.25%, in 2013. On unchanged policies, the Bank's forecasts show inflation slightly further below target in two to three years.

So, this report does point toward some further action by the Bank to help the economy.

But, as the governor said himself, when you consider the challenges facing the economy, it's pretty clear that a quarter point, one way or another, on interest rates is not really going to make a lot of difference.

Many would say the same about another £50bn or so pumped into the economy via quantitative easing.

What else could the Bank - or anyone else - do? The journalists at the press conference had plenty of more radical suggestions to put to Sir Mervyn.

'Economic puzzle'

The Telegraph's Jeremy Warner, for example, put "helicopter money" on the agenda - a showering of free money for everyone in the UK that, unlike QE, does not have to be paid back. Newsnight's Paul Mason was one of several who asked whether the time had come for the Bank to simply finance government spending directly (er, a la Zimbabwe).

Naturally, the governor did not spend a lot of time on these suggestions - which he said would naturally fall in the realm of fiscal policy. That's a subject he did, controversially, talk about quite a lot in the first half of 2010 but he has generally avoided since.

Instead of this kind of radicalism, we had the - by now predictable - admission of defeat at the hands of the crisis. The governor told us, again and again, that the Bank had no idea what would happen to the economy in the next year or so, or the eurozone - anyone who could accurately forecast that, he said, deserved a medal.

His economic deputy, Charlie Bean, also told us, in no uncertain terms, that the employment data had also left the Bank entirely flummoxed. "It's a genuine economic puzzle that we simply do not understand," he said.

As I discussed with Evan Davis on BBC Radio 4's Today programme, you seldom come away from Bank of England press conferences these days feeling happier than you did before. For that, you're better off trying the Olympic Stadium.

But you do come away feeling a bit better-informed about the thinking of our central bank and its governor. Right now they seem most focussed on the many things they don't know about the current functioning of the UK economy and its financial system, and the many events that they find impossible to predict.